Fair Trade Commission on Hanwha-Daewoo Shipbuilding M&A: "Measures Needed to Address Competition Concerns"

With all overseas competition authorities having approved Hanwha Group's acquisition of Daewoo Shipbuilding & Marine Engineering, only the decision of the Korea Fair Trade Commission (KFTC) remains. The KFTC views that a rigorous evaluation is necessary regarding the potential competition restrictions in the naval ship market due to the vertical integration of Hanwha's defense sector and Daewoo Shipbuilding's warship division, and has requested Hanwha to submit measures to alleviate concerns about competition restrictions.

On the 3rd, the Fair Trade Commission explained the vertical integration review process between Hanwha and Daewoo Shipbuilding & Marine Engineering based on these points. The KFTC currently recognizes that the vertical integration from weapons and equipment for warships to the ships themselves occurs through the merger of Hanwha and Daewoo Shipbuilding & Marine Engineering, and has collected opinions from related industries on the potential impact on the warship market. From January to March this year, the KFTC heard Hanwha's opinions four times and, from February to March, sought opinions from competing companies.

A KFTC official stated, “Competitors in the weapons industry expressed concerns that technical information about warship components is being provided differentially to competitors, raising the possibility of blocking competitors in the weapons market.” Accordingly, “Hanwha has been requested to submit measures to resolve these competition restriction concerns.” The official added, “For securing orders in the defense weapons sector, safe and precise technical capabilities to equip weapons on specific warships are extremely important. Possessing the latest information on such technical capabilities itself can greatly influence winning orders, which is why there are concerns about competition restrictions.”

Accordingly, the KFTC review team reportedly requested Hanwha at the end of March to submit remedial measures to address these concerns. A KFTC official explained, “It can be seen that the consultation process has begun accordingly. If the consultation does not proceed, the commissioners will make a decision at a plenary meeting based on the review team's opinion.” The KFTC is currently negotiating with the parties involved on remedial measures to alleviate competition concerns and, considering the gravity of the matter, intends to handle it as swiftly as possible.

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